Motor vehicle extended warranties

Dealers must fix certain defects in vehicles they have sold under statutory warranty according to the Motor Dealers and Repairers Act 2013. Some dealers offer an extended warranty for periods beyond the dealer guarantee or manufacturer's warranty. Make sure you fully read and understand the extended warranty booklet and can comply with its terms and conditions for the whole warranty period before buying the extended warranty. There are often many exclusions and special conditions.

What are extended warranties and how do they work?

There are many different types of extended warranties offered through motor dealerships by insurance companies or manufacturers. Extended warranties may be insurance or maintenance policies offered by a third party rather than a manufacturer. An extended warranty policy is usually a comprehensive 10-20 page booklet which is supposed to provide an additional cover to the free dealer guarantee or manufacturer's warranty for new or used vehicles. Generally, you have to pay extra for an extended warranty. However, some motor dealers may include an extended warranty with a minimum (highly restrictive) cover, in the sale price or offer it free of charge to make the sale more attractive.

Exclusions and special conditions

Make sure you know exactly what is covered and what is excluded from the extended warranty policy and any special conditions that you need to follow for the cover to apply. Some typical extended warranty exclusions are:

wear and tear

car modifications, including tinting or paint changes offered by the dealer

consequential damage or defect caused by misuse of the vehicle such as overheating or lack of oil

specified parts or systems.

Beware, as an extended warranty for a new car may not offer the same cover as the manufacturer's warranty, such as repairs of oil leaks.

Some common extended warranty conditions and requirements include:

a regular service during the whole warranty period at a specified place (or dealer) at your own cost eg. every 5,000km/6 months or 10,000km/12 months depending on the distance the vehicle has travelled

an excess payment up to $500 per claim depending on the part that fails

a service coupon must be stamped and posted within 7 days

a maximum payout limit which may not cover the necessary repairs and you may need to pay the gap yourself.

Tips on extended warranties

Here are some tips to remember:

There are a lot of different extended warranties on the market. Some are value for money and some are not.

Take time to fully read and understand the extended warranty's terms and conditions before agreeing to buy one. If possible, take the booklet home and thoroughly read it before committing to it. Do not make rushed decisions on the spot.

If the extended warranty is offered for 'free' or is included in the deal, expect claim limitations.

Always confirm all terms and conditions in writing only. Do not accept verbal statements.

Some finance companies may require you to purchase the extended warranty as a condition of approving your finance. You may end up paying more for your car than it is really worth and you will pay interest on the warranty as well as the car itself.

Motor vehicle extended warranty checklist

Make sure you fully read and understand the extended warranty booklet and can comply with its terms and conditions for the whole warranty period before buying the extended warranty. If you don't meet any of the extended warranty conditions you may not be able to claim on it or your policy may be cancelled. Be aware of its limitations.

IMPORTANT: Always confirm all the terms and conditions of the extended warranty in writing, not verbally. Check the terms and conditions in the extended warranty booklet before you take out the warranty. You can get this booklet from the dealer and take it home to consider.

Warranty provider

Who is providing the extended warranty?

a manufacturer

an insurance company.

Type of car and usage

Is the extended warranty for a new or used car? Different dealer guarantees and manufacturer warranties apply.

Is the car for commercial or private use? The extended warranty may not apply to commercial use.

Period

What is the period of the extended warranty?

When does the extended warranty start?

from the date of purchase

after the statutory or manufacturer's warranty expires.

Terms and conditions

Are there any special requirements? eg. regular service every 5,000km or 10,000km.

What does the extended warranty cover?

What are the exclusions or restrictions?

Can you cancel or transfer the extended warranty? It may cost extra.

Is there a cooling-off period? Some policies may have a cooling-off period of 21 days. However, you may not get the full refund if you want to cancel the policy and you will have to do it in writing within the cooling-off period.

Claims

Are there any claim limits?

Are there excess fees for each claim you make?

Where and how do you lodge a claim? You may be restricted to a particular repairer and number of claims you can make.